R.I.P. iPhone Exclusivity

Most of the hype and speculation around Apple's press event this Wednesday is focused on the expected unveiling of an Apple tablet PC. Those aren't the only rumors going around though. There is also growing gossip that Wednesday could be the day Apple announces the end of its exclusive distribution arrangement with AT&T for the iPhone.

That rumor, and the rumor that Apple will release version 4.0 of the iPhone operating system, actually seem much more plausible than the tablet PC rumors. (The iPhone 4.0 OS rumor is tied to the tablet PC rumor in that it is speculated Apple developed an iPhone 4.0 OS to add the features and functionality it needed to run the tablet PC.)

The end of exclusivity for the iPhone would also align nicely with the speculation that the mythic Apple tablet will be offered on a subsidized wireless service plan from both Verizon and AT&T. If both Verizon and AT&T will distribute the "iPhone on steroids" that the rumored "iSlate" will be, why shouldn't they also both distribute its smaller, and more famous sibling?

The end of iPhone exclusivity has been more or less a foregone conclusion for some time. Last year, industry analysts told Apple that it could see a doubling of iPhone sales if it would just end its exclusive arrangement with AT&T.

From the standpoint of Apple, dropping exclusivity is a great decision. It has nothing to gain from selling the iPhone only through AT&T. Adding Verizon to the mix more than doubles the potential pool of customers in an instant.

For Verizon, adding the iPhone alongside the Android-based Droid, and the upcoming availability of the Nexus One from Google, will make it a one-stop-shopping destination for the cream of the crop of smartphones--or "superphones" as Google has dubbed the next-generation smartphones. We can hope that Verizon has learned from AT&T's mistakes and has considered the spike in bandwidth consumption that comes with hosting high-end smartphones.

AT&T has been a whipping boy for a while. AT&T executives probably hope in secret that other networks will experience the same bandwidth and network issues it has faced as an iPhone provider, but its unlikely. As I said above, competitors have had years to learn from AT&T's mistakes, and spreading the iPhone users out across two wireless providers will probably lighten the load some for both.

The end of exclusivity will be liberating for AT&T, though. AT&T already announced at CES--most likely with knowledge that the iPhone exclusivity days are numbered-- that it will finally be expanding its smartphone portfolio to include Android and Palm WebOS devices this year.

The end of exclusivity may be good for Apple and Verizon, but I think the biggest winner will be AT&T. Tying the fortune of the company to one device is a feast or famine approach that either makes AT&T the hero or the villain depending on the scenario, and AT&T has spent much of the past few years as the villain.